February 2017

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January 2017 was special. I reached an important age milestone in my life. One which clearly defines who I am. In time, one finds out who they are. Like emerging from a tiring forest hunt for hidden treasure, the prize once sought is usually found sitting openly and within easy reach for one to admire, touch and feel its uniqueness. The prize is a revelation of clear and genuine beauty sitting quietly in the open! A well sought treasure hunt reveals the magnificence, novelty and speciality of its creation. This is what happened to me in January. A revelation of all the assets in my life that bring me love and fulfilment; accomplishment and joy. The people in my life spoke to me. They poured out their love and admiration and sheer joy into my face. I was knocked over with emotion more than once and I experienced what it means when they say ‘bursting with joy’. I was, choking, overwhelmed. Clearly, I did not realise that in all this time till that special day, I had touched so many people: friends and family alike.

The occasion gave me the opportunity to reflect on the state of my personal balance sheet. I recommend this exercise to everyone at least every decade of your life. Individuals and business people alike. The joy I experienced confirms I had invested wisely and over the long term. The dividends were pleasing indeed. I was in the money!

Your life is your factory. You invest in various assets for both the long term and short term. Each investment line with its own streams of pay-outs. The efficiency and effectiveness of the production system depends on many factors. Typically, the level of investments into you. Good health, good education and good disposition to take risks, good plans. This will all determine your body productivity. Add to this any learning from challenges and opportunities from the external environment and the coping mechanisms you have developed.

I come back to my regular commentary about money, finances and savings and investments. The story above can be retold in the form of an accounting sheet: money, time, investment and returns on investment, liabilities, debt, goodwill and risk. This is a subject I have touched on many times in my earlier blogs. Your personal balance sheet appraisal is critical to your life and general well-being. It has to be done regularly maybe every 5 years or so.

The banking and financial services regulator in our country, the Central Bank, is in the forefront of rolling out Financial Literacy as an integral part of their supervisory and regulatory mandate. Being a central bank, they are aware of the causal and direct relationship between the lack of financial literacy (general appreciation of financial matters) among a good part of the population as a reason why the sector was beset with the problems of low product uptake and growth in the sector. There are many banks and financial intermediaries but there are still as many people still unbanked and some services like insurance were still grossly under accessed. The best place to start is from the bottom, in schools and those yet unattended.

This was my observation for a long time in my time in the financial services sector. It is wonderful that with resources, networks, influence and outreach of the Central Bank, they have provided consistent leadership in improving understanding of the sector by the public, access and usage of services in these sectors. They are also known to have partnered and affiliated with stakeholders at home and abroad in pursuit of this subject matter. This year’s Financial Literacy Week (FLW) theme is ‘Learn. Plan. Afford- to meet Key Life Events’ is like going back to the roots. They have incorporated all the primary elements that makes financial decision making critical. The theme is pregnant with meanings about our state of financial preparedness. Let’s walk through the theme and understand it further.

LEARN: Financial literacy or understanding financial issues is a learned skill. It is not natural to all of us like our genes. It must be learnt from home, school, practice or conscious observation. Family in business, specific behaviour of parents and their tit bits to their children about the importance or role of money in life is a good place to start. Developing curricular in schools via commercial subjects is great. It may surprise many but some people will never have walked into a bank until later in life when they enter the job market. Parents, especially in urban areas, must introduce children to the topic of money – what it is, what it does and how it can be managed. Take them to the bank, show them what a check-book is and how it’s used. Explain what an automated teller machine (ATM) is. In many homesteads money is a source of much strife and is associated with destruction and confusion. It goes both ways by the way. Where there is too much money or where there is too little money, there is an opportunity for children to understand through teaching what role money is taking.

PLAN: whether there is too much money or too little money at hand, people must learn to manage it. I cannot say this enough. The money management plan is primarily a psychological exercise. Before it can successfully work for you, it must be underpinned by a healthy psychological understanding of what money should do in your life. The plan will require behavioural changes to carry the plan through. The plan is a timeline indicating how long it will take for your goals to be achieved. If you plan to acquire a significant asset like a house; retirement for yourself or indeed tertiary education for your children, just imagine the amount of time it takes and level of planning and commitment that is required. Every ounce of information and knowledge and investment must go into such a plan. Financial matters like any other schemes in life do not happen accidentally. There is an orchestrated series of events going on behind the scenes. First. you must plan to commit.

AFFORD: Cut your suit according to the cloth available. Financial activities are determined by price or cost i.e. affordability of the plan. Can I afford the plans I am making? Do I have enough time/ money to make it work? The point is if I am planning for retirement, I cannot start saving 5 years before the event. Retirement planning is at most a 25-year plan… like a mortgage. Planning for future events therefore requires that we start as early as possible. Starting a business falls in this category too. Don’t start a business when you retire, there will be no time for recovery financial or otherwise when or if the business fails. Conversely, do not commit financially where you are left with no money to live your daily life. The art of saving or investment or planning for your future needs should not cripple you so that daily existence becomes a struggle. It may mean you have over committed and therefore you cannot afford the plan. So, affordability of the plan in terms of money and time is important for the financial plan to succeed.

KEY: In this instance ‘key’ means two things. Key as in important (primary). It is key (important) to learn your craft plan and meaningfully fund it. If any of the factors is not important (primary) it will not succeed for lack of motivation. In other words, the objective of funding on a prolonged basis must be important to your life. It must be an inevitable event that cannot be avoided or postponed.

Key also means integral. Learning, planning and affordability of financial schemes are not mutually exclusive. They work together to produce a viable financial plan… proportionate to the resources (time, money and discount) committed to it. The integration of the financial plan to the life events are critical because one motivates the other. A life event sometime in the future motivates me to save towards it. Even though I cannot pinpoint the exact time and date and moment, I am happy to assure myself I will have the resources to meet the material requirements to deal with the event.

LIFE EVENTS: Life events are a common denominator to all humans. Birth, health, shelter, food, education, pension and ultimately death. There are life events whose costs can be shared with the external environment and those for which we are sorely responsible. The idea is that we should deal with life’s events for which we are solely responsible. Financial institutions are only interested in you if you have something they can leverage on (see January Blog).

In conclusion: The theme for the Financial Literacy Week of 2017 of ‘Learn. Plan. Afford- to meet Key Life Events’ underscores the importance of financial self-management. Every individual has a primary responsibility to plan/ build an affordable pool of resources for that rainy day. While the employer or indeed the government can take up pensions and social security later in life (where this is available). The individual must provide for education needs of children, medical needs in old age, weddings and funerals. Whether one is self-employed, or formal employment, the theme encourages each and every person to take up the habit (learn) to put money aside for those key events in your life.

As a departure from past blogs I would specifically ask readers to give me feedback on the theme of the FLW. Has the theme made you get up and go and open that savings account for yourself or your children? In what way has it influenced the conversation with family and friends about preparing for key events in your future? What have been your challenges and opportunities on this journey? If you already are saving, are you encouraged by this theme? How long have you been saving? Which key events are you saving for? I promise to stand in and forward your concerns to the right door for action. It is time for action now!







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